Indian steel mills see demand recovery

Indian steelmakers are witnessing a recovery in demand, with higher steel sales recorded on the year in August.

State-controlled Steel Authority of India Limited (Sail) recorded an increase of 35pc on the year in sales to 1.43mn t, though sales on the month dropped by 9.4pc. Domestic sales increased by 23pc on the year to 1.24mn t, while exports surged by 250pc on the year to 194,000t.

"Despite an early setback, after opening up, the market has been echoing positive sentiments," said Sail's chairman Anil Kumar Chaudhary. "We are quite positive on demand picking up soon as the economy would return to normal."

Major mills including Tata Steel and Jindal Steel & Power Limited (JSPL) have confirmed that their steel sales are less dependent on exports as compared to the first quarter, because of the withdrawal of lockdown restrictions across major cities. India's nationwide lockdown to curb the spread of Covid-19 that started on 25 March had weighed on domestic steel demand and output. This led to steel mills diverting their focus to export markets to counter weak domestic demand.

India's steel exports in April-June increased to 1.9mn t, from a very low base of 46,000t during April-June 2019. Trends changed in July, with exports declining by 11.4pc from June to 461,000t, while domestic sales rose by 10pc to 5.65mn t.

JSPL announced in August an increase in the company's total steel sales by 37pc on the year to 682,000t, while output increased by 18pc to 625,000t. Sales were also up by 7pc from a year earlier. The company's steel exports accounted for 42pc of total sales volume.

"The company's steel exports have come down significantly with an increase in domestic sales post the lockdown period," said JSPL's managing director, VR Sharma.

Domestic steel prices in India have also risen since July, though the rise halted in recent weeks.

The Argus weekly price for India's domestic hot rolled coil with 3mm thickness stood at 39,000 rupees/t ($531/t) ex-Mumbai last week, unchanged since 14 August.

India's cumulative crude steel output in April-July dropped by 37pc on the year to 23.25mn t, while demand shrank by 50pc to 16.35mn t, according to revised steel ministry data.

Growth is likely to be negative in the coming months given substantial demand destruction in key consumer segments including construction, infrastructure and commercial vehicles, said a recent statement by Mumbai-based research firm India Ratings.

Dealer channel checks suggest low activity on the ground with longer payment cycles implying gradual demand recovery in coming months, a Morgan Stanley statement said.

By Charlotte Rao